Marcus & Millichap Reports Highest Number of Special Asset Assignments Since 1993

Pipeline indicates major wave of distressed property sales starting in 2009.

ATLANTA, GA – Marcus & Millichap Real Estate Investment Services, the nation’s largest real estate investment services firm, will complete the highest volume of distressed asset valuations and sales since 1993.

Turmoil in the financial services sector, which has led to an increased number of bankruptcies, mergers and consolidations — combined with the worsening economic downturn — has placed upward pressure on vacancies in a number of commercial real estate sectors, resulting in a higher number of distressed situations.

“To date we have completed more than 1,500 special asset assignments for financial institutions, asset managers and large owners – and we expect that number to exceed 2,000 by year-end 2008, including valuations, advisory work and dispositions,” says Bernard J. Haddigan, (top right photo) senior vice president and managing director of Marcus & Millichap, and executive in charge of the Special Assets Services division.

“Distressed properties and portfolios are being well received by private investors so far, and we expect to market a large volume of these properties during the next several months. This is driven by our lender clients’ need to clear their balance sheets and various types of funds, which are actively working to free up capital,” he adds.

The Special Assets Services division, which was formed in 2006 and expanded earlier this year, is comprised of eight regional directors who oversee a team of experienced investment brokers, located throughout Marcus & Millichap’s network of offices.

“There has been a marked increase in the number of distressed property sales being arranged by Marcus & Millichap investment specialists,” explains Haddigan.

“The macro trend is driven more by banks’ exposure to construction loans, property rehab loans and high-leverage transactions closed between 2006 and 2007 that are facing cash-flow problems due to higher-than-anticipated vacancies.”

Some regions of the United States face greater exposure to distressed assets than others.

“Many of the secondary Midwestern markets are experiencing hardship in the manufacturing sector, including Detroit, which is also experiencing continuing job losses and higher commercial vacancy rates,” explains Haddigan.

Distressed asset acquisitions are dominated by private investors, says Haddigan.

“Some of these investors are new to the market, and some have a higher level of experience. Private investors have the most flexibility and risk tolerance and can obtain financing for smaller transactions, which constitute the majority of the distressed situations.

"We expect this to continue for some time and there appears to be a significant amount of capital on the sidelines that will become more aggressive as the inventory of distressed properties increases next year.

Many of the larger opportunity funds are focused on purchasing commercial paper instead of specific properties, but we expect that trend to shift in 2009 and 2010 as opportunity funds resume their focus on property acquisitions.”

Marcus & Millichap brings several key advantages to owners and lenders of distressed properties including its market research, extensive local market coverage, particularly in secondary and tertiary markets where much of the distressed inventory is concentrated, and most important, its industry-leading access to private capital.

“We engage a team that can assess properties thoroughly and quickly, and expose the appropriate assets to the largest pool of private investors nationally who comprise more than 90 percent of sales in the current market,” says Haddigan.

Press Contact: Stacey Corso, Communications Department, (925) 953-1716